Indian bank efficiency and productivity changes with undesirable outputs

A disaggregated approach

Research output: Contribution to journalArticle

77 Citations (Scopus)

Abstract

The objective of this study is to examine technical efficiency and productivity growth in the Indian banking sector over the period from 2004 to 2011. We apply an innovative methodological approach introduced by Chen et al. (2011) and Barros et al. (2012), who use a weighted Russell directional distance model to measure technical inefficiency. We further modify and extend that model to measure TFP change with NPLs. We find that the inefficiency levels are significantly different among the three ownership structure of banks in India. Foreign banks have strong market position in India and they pull the production frontier in a more efficient direction. SPBs and domestic private banks show considerably higher inefficiency. We conclude that the restructuring policy applied in the late 1990s and early 2000s by the Indian government has not had a long-lasting effect.

Original languageEnglish
Pages (from-to)41-50
Number of pages10
JournalJournal of Banking and Finance
Volume38
Issue number1
DOIs
Publication statusPublished - Jan 1 2014

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Bank efficiency
Undesirable outputs
Productivity change
India
Inefficiency
Efficiency change
Ownership structure
Production frontier
Productivity growth
Foreign banks
Pull
Technical inefficiency
Market position
Technical efficiency
Government
Banking sector

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Indian bank efficiency and productivity changes with undesirable outputs : A disaggregated approach. / Fujii, Hidemichi; Managi, Shunsuke; Matousek, Roman.

In: Journal of Banking and Finance, Vol. 38, No. 1, 01.01.2014, p. 41-50.

Research output: Contribution to journalArticle

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